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Buying, owning and selling commercial property can be nuanced in ways that other kinds of property purchases aren’t. Today we’re exploring some of the most commonly asked questions, to help you get a handle on what to expect and how best to handle any issues that might arise.
What is the definition of a commercial property?
In the broadest sense, commercial property is a building in which the majority of the space accommodates activities which are conducted for profit. The simplest example of this would be a shop, but it can include everything from a pub to a shopping centre. Even businesses which are not visited by customers directly, such as offices, are considered to be commercial property.
Do you pay stamp duty on commercial property?
Sales on commercial property are subject to stamp duty, much the same as residential properties, although different bandings apply. These are:
| Price | Stamp duty rate |
|---|---|
| Up to £150,000 | 0% |
| £150,001 to £250,000 | 2% |
| £250,001+ | 5% |
- https://www.gov.uk/stamp-duty-land-tax/nonresidential-and-mixed-rates
Even if your transaction is less than £150k, it’s highly likely you’ll need to complete a Stamp Duty Land Tax form, and return it. It’s important to remember, rates can be different in Scotland and Wales than in England, so check according to where your property is located.
How do I value a commercial property?
Depending on the type of building and planning use, there are a number of ways to value a commercial property. The most common method of valuation is to capitalise the current rental income or the potential income if valuing a vacant property. if the property benefits from a rental income then the investment method of valuation will determine the market value of the property. If the property is vacant then the valuer will research the market to ascertain the market rent based on the size of the premises and then capitalise the rental to establish a market freehold value.
Ultimately the best approach is to get a professional appraisal, which will provide you with the highest level of accuracy and detail.
Is commercial property a good investment?
Particularly during the present time of high inflation in the UK, assets, including property of all kinds are generally regarded to be solid investments. They are thought to hold their “real price”, while their figurative price may increase as the currency they are priced in is inflated.
However, as with any investment there are always risks. For example, during 2020/21, many retail businesses which were seen as “solid investments” saw dramatically reduced footfall and business, in turn threatening the underlying investment of the property owners.
How do I invest in commercial property?
The primary method that people use to invest in commercial property is “buy-to-let”: they buy a commercial property, in order to rent it to a business, guaranteeing a monthly income from the property.
Another approach is to purchase a property, then sell it at a later date for a profit. Sometimes this will be a short term “flipping” of a property, in other cases, you might make improvements to a property, then resell it at a higher price based on the enhancements.
When is an EPC not required for commercial property?
An Energy Performance Certificate is generally required for both commercial and residential properties, however there are some circumstances where it’s not needed. These are:
- If the building is temporary, and only intended for up to 2 years of use.
- If the building is detached, and has less than 50 square metres of floor space.
- If the building is listed or otherwise protected; alterations would be unacceptable.
There are other rare circumstances, listed on the government’s businesses website.
How much is commercial property insurance?
The price of commercial property insurance can be very varied, depending on circumstances. For example, a very large warehouse is bound to cost more to insure than a small corner shop. The best way to find out is to seek a quote for a commercial insurer. Be sure to check the price with multiple providers, to find the best available price.
Being a commercial landlord and owning commercial property can be challenging, but very rewarding at the same time. Whether buying, selling or managing a commercial property, Readings have the expertise to make the process easy and manageable. Get in touch today.
